Exhibit 10.1


 


Execution Version


 


GRIFFON CORPORATION


 


4.00% Convertible
Subordinated Notes due 2017


 


Purchase Agreement


 


December 16, 2009


 


Goldman, Sachs &
Co.


As representative of the several Purchasers


named in Schedule I hereto,


85 Broad Street


New York, New York 10004


 


Ladies and Gentlemen:


 


Griffon Corporation, a
Delaware corporation (the “Company”), proposes, subject to the terms and
conditions stated herein, to issue and sell to the Purchasers named in Schedule
I hereto (the “Purchasers”) an aggregate of $100,000,000 principal amount (the
“Firm Securities”) of its 4.00% Convertible Subordinated Notes due 2017 (the
“Notes”), convertible into cash and shares of the Company’s common stock, par
value $0.25 (“Stock”), upon the occurrence of certain circumstances under the
terms of an indenture to be dated December 21, 2009 (the “Indenture”)
between the Company and American Stock Transfer & Trust Company, LLC
as trustee (the “Trustee”) and, at the election of the Purchasers, up to an
aggregate of $15,000,000 in additional aggregate principal amount of Notes (the
“Optional Securities”) (the Firm Securities and the Optional Securities which
the Purchasers elect to purchase pursuant to Section 2 hereof are herein
collectively called the “Securities”).


 


1.             The Company represents and warrants
to, and agrees with, each of the Purchasers that:


 


(a)                      A preliminary offering circular, dated December 15,
2009 (the “Preliminary Offering Circular”), and an offering circular, dated December 16,
2009 (the “Offering Circular”), have been prepared in connection with the
offering of the Securities and shares of the Stock issuable upon conversion
thereof. The Preliminary Offering Circular, as amended and supplemented
immediately prior to the Applicable Time (as defined in Section 1(b)), is
hereinafter referred to as the “Pricing Circular”.  Any reference to the Preliminary Offering
Circular, the Pricing Circular or the Offering Circular shall be deemed to
refer to and include (i) the Company’s most recent Annual Report on Form 10-K,
(ii) the Company’s Definitive Proxy Statement filed with the United States
Securities and Exchange Commission (the “Commission”) on December 29, 2008
(but only with respect to the information under the following captions:
“Executive Compensation,” “Proposal 1 - Election of Directors,” “Management,”
“Audit Committee Report,” “Corporate Governance,” “Stock Ownership,” “Report of
the Compensation Committee,” “Section 16(a) Beneficial Ownership
Reporting Compliance,” “Proposal 4 - Ratification of Independent Registered
Public Accounting Firm” and “Audit and Related Fees”), (iii) the Company’s
Current Reports on Form 8-K filed with 


 

















 


the Commission on October 15, 2009 and November 9,
2009 and (iv) all subsequent documents filed with the Commission pursuant to
Section 13(a), 13(c) or 15(d) of the United States Securities
Exchange Act of 1934, as amended (the “Exchange Act”) on or prior to the date
of such circular and any reference to the Preliminary Offering Circular or the
Offering Circular, as the case may be, as amended or supplemented, as of any
specified date, shall be deemed to include (i) any documents filed with
the Commission pursuant to Section 13(a), 13(c) or 15(d) of the
Exchange Act after the date of the Preliminary Offering Circular or the Offering
Circular, as the case may be, and prior to such specified date and (ii) any
Additional Issuer Information (as defined in Section 5(f)) furnished by
the Company prior to the completion of the distribution of the Securities; and
all documents filed under the Exchange Act and so deemed to be included in the
Preliminary Offering Circular, the Pricing Circular or the Offering Circular,
as the case may be, or any amendment or supplement thereto are hereinafter
called the “Exchange Act Reports”.  The
Exchange Act Reports, when they were or are filed with the Commission,
conformed or will conform in all material respects to the applicable
requirements of the Exchange Act and the applicable rules and regulations
of the Commission thereunder; and no such documents were filed with the
Commission since the Commission’s close of business on the business day
immediately prior to the date of this Agreement and prior to the execution of
this Agreement, except as set forth on Schedule II(a) hereof. The
Preliminary Offering Circular or the Offering Circular and any amendments or
supplements thereto and the Exchange Act Reports did not and will not, as of
their respective dates, contain an untrue statement of a material fact or omit
to state a material fact necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading;
provided, however, that this representation and warranty shall not apply to any
statements or omissions made in reliance upon and in conformity with
information furnished in writing to the Company by a Purchaser through Goldman,
Sachs & Co. expressly for use therein;


 


(b)                     For the purposes of this Agreement, the
“Applicable Time” is 9:30 a.m. (Eastern time) on the date of this
Agreement; the Pricing Circular as supplemented by the information set forth in
Schedule III hereto, taken together (collectively, the “Pricing Disclosure
Package”) as of the Applicable Time, did not include any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; and each Company Supplemental Disclosure Document (as
defined in Section 6(a)(ii)) listed on Schedule II(b) hereto
does not conflict with the information contained in the Pricing Circular or the
Offering Circular and each such Company Supplemental Disclosure Document, as
supplemented by and taken together with the Pricing Disclosure Package as of
the Applicable Time, did not include any untrue statement of a material fact or
omit to state any material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; provided, however, that this representation and warranty shall not
apply to statements or omissions made in a Company Supplemental Disclosure
Document in reliance upon and in conformity with information furnished in
writing to the Company by a Purchaser through Goldman, Sachs & Co.
expressly for use therein;


 


(c)                      Neither the Company nor any of its
subsidiaries has sustained since the date of the latest audited financial
statements included in the Pricing Circular and Offering Circular any material
loss or interference with its business from fire, explosion, flood or other
calamity, whether or not covered by insurance, or from any labor dispute or
court or governmental action, order or decree, otherwise than as set forth or
contemplated in the Pricing Circular 


 


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and Offering Circular or as would not reasonably be
expected to have a material adverse effect on the business, properties,
financial position, stockholders’ equity, results of operations or prospects of
the Company and its subsidiaries, taken as a whole (a “Material Adverse
Effect”); and, since the respective dates as of which information is given in
the Pricing Circular, there has not been any change in the capital stock or
long-term debt of the Company or any of its subsidiaries or any material
adverse change, or any development involving a prospective material adverse
change, in or affecting the general affairs, management, financial position,
stockholders’ equity or results of operations of the Company and its
subsidiaries, taken as a whole, otherwise than as set forth or contemplated in
the Pricing Circular and Offering Circular;


 


(d)                     The Company and its subsidiaries have
good and marketable title in fee simple to all real property and good and
marketable title to all personal property owned by them, in each case free and
clear of all liens, encumbrances and defects except such as are described in
the Pricing Circular or such as do not materially affect the value of such
property and do not interfere with the use made and proposed to be made of such
property by the Company and its subsidiaries; and any real property and
buildings held under lease by the Company and its subsidiaries are held by them
under valid, subsisting and enforceable leases, subject to (1) applicable
bankruptcy, reorganization, insolvency, moratorium, fraudulent transfer or
other laws affecting creditors’ rights generally from time to time in effect
and (2) to general principles of equity and public policy and the
discretion of the court or other body before which any proceeding may be
brought, including without limitation, concepts of materiality, reasonableness,
good faith and fair dealing, in each case, regardless of whether considered in
a proceeding in equity or at law (clauses (1) and (2), collectively, the
“Enforceability Exceptions”) and with such exceptions as are not material and
do not interfere with the use made and proposed to be made of such property and
buildings by the Company and its subsidiaries;


 


(e)                      The Company has been duly incorporated
and is validly existing as a corporation in good standing under the laws of the
State of Delaware, and, except as would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect, has power and
authority (corporate and other) to own its properties and conduct its business
as described in the Pricing Circular and Offering Circular, and has been duly
qualified as a foreign corporation for the transaction of business and is in
good standing under the laws of each other jurisdiction in which it owns or
leases properties or conducts any business so as to require such qualification,
or is subject to no material liability or disability by reason of the failure
to be so qualified in any such jurisdiction; and, except as would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect, each subsidiary of the Company has been duly incorporated and
is validly existing as a corporation in good standing under the laws of its
jurisdiction of incorporation;


 


(f)                        The Company has an authorized
capitalization as set forth in the Pricing Circular and Offering Circular, and
all of the issued shares of capital stock of the Company have been duly and
validly authorized and issued and are fully paid and non-assessable; the shares
of Stock initially issuable upon conversion of the Securities have been duly
and validly authorized and reserved for issuance and, when issued and delivered
in accordance with the provisions of the Securities and the Indenture referred
to below, will be duly and validly issued, fully paid and non-assessable and
will conform in all material respects to the description of the Stock contained
in the Pricing Circular and Offering Circular; and all of the 


 


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issued shares of capital stock of each subsidiary of
the Company have been duly and validly authorized and issued, are fully paid
and non-assessable and are owned directly or indirectly by the Company, free
and clear of all liens, encumbrances, equities or claims, except as otherwise
disclosed in the Offering Circular;


 


(g)                     The Securities have been duly authorized
and, when issued and delivered pursuant to this Agreement (and assuming due
authentication by the Trustee and payment and delivery in accordance with this
Agreement), will have been duly executed, authenticated, issued and delivered
and will constitute valid and legally binding obligations of the Company
entitled to the benefits provided by the Indenture under which they are to be
issued, which will be substantially in the form previously delivered to you;
the Indenture has been duly authorized and, when executed and delivered by the
Company and the Trustee (assuming the due authorization, execution and delivery
by the Trustee and assuming that the Indenture constitutes a valid and binding
obligation of the Trustee), the Indenture will constitute a valid and legally
binding instrument, enforceable against the Company in accordance with its
terms, subject, as to enforcement, to the Enforceability Exceptions; and the
Securities and the Indenture will conform in all material respects to the
descriptions thereof in the Pricing Disclosure Package and the Offering
Circular and will be in substantially the form previously delivered to you;


 


(h)                     The Company has all requisite corporate
power and authority to execute and deliver this Agreement and the Indenture, to
perform its obligations hereunder and thereunder and to consummate the
transactions contemplated hereby and thereby;


 


(i)                         None of the transactions contemplated by
this Agreement (including, without limitation, the use of the proceeds from the
sale of the Securities) will violate or result in a violation of Section 7
of the Exchange Act, or any regulation promulgated thereunder, including,
without limitation, Regulations T, U, and X of the Board of Governors of the
Federal Reserve System;


 


(j)                         Prior to the date hereof, neither the
Company nor any of its affiliates has taken any action which is designed to or
which has constituted or which might have been expected to cause or result in
stabilization or manipulation of the price of any security of the Company in
connection with the offering of the Securities;


 


(k)                      The issue and sale of the Securities and
the compliance by the Company with all of the provisions of the Securities, the
Indenture and this Agreement and the consummation of the transactions herein
and therein contemplated (i) will not conflict with or result in a breach
or violation of any of the terms or provisions of, or constitute a default
under, any indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument to which the Company or any of its subsidiaries is a
party or by which the Company or any of its subsidiaries is bound or to which
any of the property or assets of the Company or any of its subsidiaries is
subject, nor (ii) will such action result in any violation of the
provisions of the Certificate of Incorporation or By-laws of the Company, nor (iii) will
such action result in a violation of any statute or any order, rule or
regulation of any court or governmental agency or body having jurisdiction over
the Company or any of its subsidiaries or any of their properties, except as
would not, in the case of (i) and (iii), individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect; and no consent,
approval, authorization, order, registration or qualification of or with any
such court or governmental agency or body is required for the issue and sale of
the Securities or the consummation by the Company of the transactions
contemplated by this Agreement or the Indenture, except 


 


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such consents, approvals, authorizations,
registrations or qualifications as may be required under state securities or
Blue Sky laws in connection with the purchase and distribution of the
Securities by the Purchasers and such other approvals as have been duly
obtained and are in full force and effect;


 


(l)                         Neither the Company nor any of its
subsidiaries is in violation of its Certificate of Incorporation or By-laws or
in default in the performance or observance of any material obligation,
covenant or condition contained in any indenture, mortgage, deed of trust, loan
agreement, lease or other material agreement or instrument to which it is a
party or by which it or any of its properties may be bound;


 


(m)                   The statements set forth in the Pricing
Circular and Offering Circular under the captions “Description of Notes” and
“Description of Our Common Stock”, insofar as they purport to constitute a
summary of the terms of the Securities and the Stock, and under the captions
“Material United States Federal Income Tax Considerations” and “Plan of
Distribution”, insofar as they purport to describe the provisions of the laws
and documents referred to therein, are accurate and fair summaries of the
matters described therein in all material respects (based on the assumptions
described therein);


 


(n)                     Other than as set forth in the Pricing
Circular and Offering Circular, there are no legal or governmental proceedings
pending to which the Company or any of its subsidiaries is a party or of which
any property of the Company or any of its subsidiaries is the subject which, if
determined adversely to the Company or any of its subsidiaries, would
individually or in the aggregate have a Material Adverse Effect; and, to the
Company’s knowledge, no such proceedings are threatened or contemplated by
governmental authorities or threatened by others;


 


(o)                     When the Securities are issued and
delivered pursuant to this Agreement, the Securities will not be of the same
class (within the meaning of Rule 144A under the Securities Act of 1933,
as amended (the “Act”)) as securities which are listed on a national securities
exchange registered under Section 6 of the Exchange Act or quoted in a
U.S. automated inter-dealer quotation system;


 


(p)                     The Company is subject to Section 13
or 15(d) of the Exchange Act;


 


(q)                     The Company is not, and after giving
effect to the offering and sale of the Securities and the application of the
proceeds thereof, will not be an “investment company”, as such term is defined
in the United States Investment Company Act of 1940, as amended (the
“Investment Company Act”);


 


(r)                        Neither the Company nor any person acting
on its behalf (provided that no representation is made as to the Purchasers or
any person acting on their behalf) has offered or sold the Securities by means
of any general solicitation or general advertising within the meaning of Rule 502(c) under
the Act;


 


(s)                      Except as disclosed in the Pricing
Disclosure Package and the Offering Circular, within the preceding six months,
neither the Company nor any other person acting on behalf of the Company
(provided that no representation is made as to the Purchasers or any person acting
on their behalf) has offered or sold to any person any Securities, or any
securities of the same or a similar class as the Securities, other than
Securities offered or sold to the Purchasers hereunder.  The Company will take reasonable precautions
designed to insure that any offer or sale, direct or indirect, in the United
States or to any U.S. person (as defined 


 


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in Rule 902 under the Act) of any Securities or
any substantially similar security issued by the Company, within six months
subsequent to the date on which the distribution of the Securities has been
completed (as notified to the Company by Goldman, Sachs & Co.), is
made under restrictions and other circumstances reasonably designed not to affect
the status of the offer and sale of the Securities in the United States and to
U.S. persons contemplated by this Agreement as transactions exempt from the
registration provisions of the Securities Act;


 


(t)                        The Company maintains a system of
internal control over financial reporting (as such term is defined in Rule 13a-15(f) of
the Exchange Act) that complies with the requirements of the Exchange Act and
has been designed or caused to be designed by the Company’s principal executive
officer and principal financial officer, or under their supervision, to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with
generally accepted accounting principles. 
The Company’s internal control over financial reporting as of September 30,
2009, the last date on which such control was evaluated, was effective and the
Company is not aware of any material weaknesses in its internal control over
financial reporting;


 


(u)                     Since the date of the latest audited
financial statements included or incorporated by reference in the Pricing
Circular and Offering Circular, there has been no change in the Company’s
internal control over financial reporting that has materially affected, or is
reasonably likely to materially affect, the Company’s internal control over
financial reporting;


 


(v)                     The Company maintains disclosure controls
and procedures (as such term is defined in Rule 13a-15(e) of the
Exchange Act) that comply with the requirements of the Exchange Act; such
disclosure controls and procedures have been designed to ensure that material
information relating to the Company and its subsidiaries is made known to the
Company’s principal executive officer and principal financial officer by others
within those entities; and the Company has carried out evaluations of the
effectiveness of its disclosure controls and procedures as required by Rule 13a-15
of the Exchange Act and determined that such disclosure controls and procedures
are effective;


 


(w)                   Grant Thornton LLP, which has audited
certain financial statements of the Company and its subsidiaries is an
independent registered public accounting firm as required by the Act and the rules and
regulations of the Commission thereunder;


 


(x)                       No labor disturbance by or material
dispute with employees of the Company or any of its subsidiaries exists or, to
the knowledge of the Company, is threatened or imminent;


 


(y)                     The Company and its subsidiaries (i) are
in compliance with any and all applicable non-U.S., U.S. federal, state and
local laws and regulations relating to the protection of human health and
safety (as such is affected by hazardous or toxic substances or wastes,
pollutants or contaminants), the environment or hazardous or toxic substances
or wastes, pollutants or contaminants (“Environmental Laws”); (ii) have
received and are in compliance with all permits, licenses or other approvals
required of them under applicable Environmental Laws to conduct their
respective businesses; (iii) have not received written notice of any
actual or potential liability under any Environmental Law; and (iv) have
not been named as a “potentially responsible party” under the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, as amended;
except for, in each of clauses (i)–(iv); as would not be reasonably expected to
result in the Company or its subsidiaries incurring a material liability
pursuant to the Environmental Laws;


 


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(z)                       Except as set forth in the Pricing
Disclosure Package, (i) the minimum funding standard under Section 302
of the Employee Retirement Income Security Act of 1974, as amended, and the
regulations and published interpretations thereunder (“ERISA”), has been
satisfied by each “pension plan” (as defined in Section 3(2) of
ERISA) that has been established or maintained by the Company and/or one or
more of its subsidiaries, to the extent applicable; (ii) each of the
Company and its subsidiaries has fulfilled its obligations, if any, under Section 515
of ERISA; (iii) except as would not, individually or in the aggregate,
have a Material Adverse Effect, each pension plan and welfare plan established
or maintained by the Company and/or one or more of its subsidiaries is in
compliance in all respects with the currently applicable provisions of ERISA,
to the extent applicable; and (iv) none of the Company or any of its
subsidiaries has incurred or would reasonably be expected to incur any material
withdrawal liability under Section 4201 of ERISA; and (v) none of the
Company or any of its subsidiaries has incurred any material liability under Section 4062,
4063, or 4064 of ERISA;


 


(aa)                The Company and its subsidiaries own,
possess, license or have other rights to use all patents, trademarks and
service marks, trade names, copyrights, domain names (in each case including
all registrations and applications to register same), inventions, trade
secrets, technology, know-how and other intellectual property (collectively, the
“Intellectual Property”) necessary for the conduct of their respective
businesses as now conducted or as proposed in the Pricing Disclosure Package to
be conducted, except for as described in the Pricing Disclosure Package and
Offering Circular or where such failure to own or possess such Intellectual
Property would not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect.  Except
as set forth in the Pricing Disclosure Package or as would not, individually or
in the aggregate, reasonably be expected to have a Material Adverse Effect, (i) the
Company and its subsidiaries own, or have rights to use under license, all such
Intellectual Property free and clear in all respects of all adverse claims,
liens or other encumbrances; (ii) to the knowledge of the Company, there
is no infringement by third parties of any such Intellectual Property; (iii) there
is no pending or, to the Company’s knowledge, threatened action, suit,
proceeding or claim by any third party challenging the Company’s or its
subsidiaries’ rights in or to any such Intellectual Property; (iv) there
is no pending or, to the Company’s knowledge, threatened action, suit,
proceeding or claim by any third party challenging the validity, scope or
enforceability of any such Intellectual Property; and (v) there is no
pending or, to the Company’s knowledge, threatened action, suit, proceeding or
claim by any third party that the Company or any subsidiary infringes or
otherwise violates any patent, trademark, copyright, trade secret or other
proprietary rights of any third party;


 


(bb)              Except as set forth in the Pricing
Disclosure Package, there are no contracts, agreements or understandings
between the Company and any person granting such person the right to require
the Company to file a registration statement under the Securities Act with
respect to any securities of the Company owned by such person or that such
person has the right to acquire;


 


(cc)                Neither the Company nor any
of its subsidiaries is a party to any contract, agreement or understanding with
any person (other than this Agreement) that could give rise to a valid claim
against any of them or the Purchasers for a brokerage commission, finder’s fee
or like payment in connection with the offering and sale of the Securities;


 


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(dd)              Neither the Company nor any
of its subsidiaries, nor to the knowledge of the Company, any director,
officer, agent, employee or other person associated with or acting on behalf of
the Company or any of its subsidiaries, has (i) used any corporate funds
for any unlawful contribution, gift, entertainment or other unlawful expense
relating to political activity, (ii) made any direct or indirect unlawful
payment to any foreign or domestic government official or employee from
corporate funds, (iii) violated or is in violation of any provision of the
Foreign Corrupt Practices Act of 1977 or (iv) made any unlawful bribe,
rebate, payoff, influence payment or kickback;


 


(ee)                The operations of the Company
and its subsidiaries are and have been conducted at all times in compliance
with applicable financial recordkeeping and reporting requirements of the
Currency and Foreign Transactions Reporting Act of 1970, as amended, the money
laundering statutes of all applicable jurisdictions, the rules and
regulations thereunder and any related or similar rules, regulations or
guidelines, issued, administered or enforced by any governmental agency
(collectively, the “Money Laundering
Laws”) and no action, suit or proceeding by or before any court or
governmental agency, authority or body or any arbitrator involving the Company
or any of its subsidiaries with respect to the Money Laundering Laws is pending
or, to the knowledge of the Company, threatened;


 


(ff)                    Neither the Company nor any
of its subsidiaries nor, to the knowledge of the Company, any director,
officer, agent, employee or affiliate of the Company or any of its subsidiaries
is currently subject to any U.S. sanctions administered by the Office of Foreign
Assets Control of the U.S. Treasury Department (“OFAC”).  The Company will not directly or indirectly
use the proceeds of the offering contemplated hereby, or lend, contribute or
otherwise make available such proceeds to any subsidiary, joint venture partner
or other person or entity, for the purpose of financing the activities of any
person currently subject to any U.S. sanctions administered by OFAC;


 


(gg)              Assuming the accuracy of,
and the Purchasers’ compliance with, the representations, warranties and agreements
of the Purchasers herein, and the compliance by the holders of the Securities
with the offering and transfer restrictions set forth in the Offering Circular,
no registration under the Securities Act of the Securities is required for the
issuance of the Securities in accordance with the terms of this Agreement and
the Indenture; and


 


(hh)              Except as disclosed in the Pricing
Circular and the Offering Circular, the Company and each of its subsidiaries
carry, or are covered by, insurance in such amounts and covering such risks as
they believe is adequate for the conduct of their respective businesses and the
value of their respective properties and the Company and its subsidiaries are
in compliance with the terms of such policies and instruments in all material
respects.  The Company has not received
any notice from its insurers that the Company or its subsidiaries will not be
able to (i) renew their existing insurance coverage as and when such
policies expire or (ii) to obtain comparable coverage from similar
institutions as may be reasonably necessary or appropriate to conduct its
business as now conducted and at a comparable cost.


 


2.                           Subject to the terms and conditions
herein set forth, (a) the Company agrees to issue and sell to each of the
Purchasers, and each of the Purchasers agrees, severally and not jointly, to
purchase from the Company, at a purchase price of 97.0% of the principal amount
thereof, plus accrued interest, if any, the principal amount of Securities set
forth opposite the name of such Purchaser in Schedule I hereto, and (b) in
the event and to the extent that the Purchasers shall exercise the election to
purchase Optional Securities as provided below, the Company agrees to issue and
sell to each of the Purchasers, and each of the 


 


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Purchasers agrees, severally and not jointly, to
purchase from the Company, at the same purchase price set forth in clause (a) of
this Section 2, that portion of the aggregate principal amount of the
Optional Securities as to which such election shall have been exercised (to be
adjusted by you so as to eliminate fractions of $1,000) determined by
multiplying such aggregate principal amount of Optional Securities by a
fraction, the numerator of which is the maximum aggregate principal amount of
Optional Securities which such Purchaser is entitled to purchase as set forth
opposite the name of such Purchaser in Schedule I hereto and the denominator of
which is the maximum aggregate principal amount of Optional Securities which
all of the Purchasers are entitled to purchase hereunder.


 


The Company hereby grants to
the Purchasers the right to purchase at their election up to $15,000,000 in
aggregate principal amount of Optional Securities, at the purchase price set
forth in clause (a) of the first paragraph of this Section 2, for the
sole purpose of covering sales of securities in excess of the aggregate
principal amount of Firm Securities.  Any
such election to purchase Optional Securities may be exercised by written
notice from you to the Company, given within a period of 30 calendar days after
the First Time of Delivery (as defined in Section 4 hereof), setting forth
the aggregate principal amount of Optional Securities to be purchased and the
date on which such Optional Securities are to be delivered, as determined by
you but in no event earlier than two business days after the date of such
notice (unless otherwise agreed between the Company and Goldman, Sachs &
Co.) or prior to the First Time of Delivery (as defined in Section 4
hereof).


 


3.               Upon the authorization by
you of the release of the Firm Securities, the several Purchasers propose to
offer the Firm Securities for sale upon the terms and conditions set forth in
this Agreement, the Pricing Disclosure Package and the Offering Circular and
each Purchaser hereby represents and warrants to, and agrees with the Company
that:


 


(a)                      It will offer
and sell the Securities only to  persons who it
reasonably believes are “qualified institutional buyers” (“QIBs”) within the
meaning of Rule 144A under the Act in transactions meeting the
requirements of Rule 144A;


 


(b)                     It is an “Institutional
Accredited Investor” as such term in defined in Rule 501 of Regulation D;
and


 


(c)                      It will not
offer or sell the Securities by any form of general solicitation or general
advertising, including but not limited to the methods described in Rule 502(c) under
the Act.


 


4.               (a)       The Securities to be purchased by each Purchaser hereunder
will be represented by one or more definitive global Securities in book-entry
form which will be deposited by or on behalf of the Company with The Depository
Trust Company (“DTC”) or its designated custodian.  The Company will deliver the Securities to
Goldman, Sachs & Co., for the account of each Purchaser, against
payment by or on behalf of such Purchaser of the purchase price therefor by
wire transfer in Federal (same day) funds, by causing DTC to credit the
Securities to the account of Goldman, Sachs & Co. at DTC.  The Company will cause the certificates representing
the Securities to be made available to Goldman, Sachs & Co. for
checking at least twenty-four hours prior to the Time of Delivery (as defined
below) at the office of  Latham &
Watkins LLP, 885 Third Avenue, New York, New York 10022  (the
“Closing Location”).  The time and date of such delivery
and payment shall be 9:30 a.m., New York City time, on December 21,
2009 or such other time and date as Goldman, Sachs & Co. and the
Company may agree upon in writing, and, with respect to the Optional Securities, 9:30 a.m.,
New York City time, on the date specified by Goldman, Sachs & Co. in
the written 


 


9

















 


notice given by the Purchasers of the Purchasers’
election to purchase the Optional Securities, or at such other time and date as
Goldman, Sachs & Co. and the Company may agree upon in writing.  Such time and date for delivery of the Firm
Securities is herein called the “First Time of Delivery”, any time and date for
delivery of Optional Securities is herein called an “Optional Time of
Delivery”, and each such time and date for delivery of Securities is herein
called a “Time of Delivery”.


 


(b)                     The documents to be
delivered at such Time of Delivery by or on behalf of the parties hereto
pursuant to Section 8 hereof, including the cross-receipt for the
Securities and any additional documents requested by the Purchasers pursuant to
Section 8(i) hereof, will be delivered at such time and date at the
Closing Location, and the Securities will be delivered at DTC or its designated
custodian), all at such Time of Delivery. 
A meeting will be held at the Closing Location at 5:00 p.m., New
York City time, on the New York Business Day next preceding such Time of
Delivery, at which meeting the final drafts of the documents to be delivered
pursuant to the preceding sentence will be available for review by the parties
hereto.  For the purposes of this Section 4,
“New York Business Day” shall mean each Monday, Tuesday, Wednesday, Thursday
and Friday which is not a day on which banking institutions in New York are
generally authorized or obligated by law or executive order to close.


 


5.               The Company  agrees with each of the Purchasers:


 


(a)                      To prepare the
Offering Circular in a form approved by you; to make no amendment or any
supplement to the Offering Circular which shall be reasonably disapproved by
you promptly after reasonable notice thereof; and to furnish you with copies
thereof;


 


(b)                     Promptly from time to time
to take such action as you may reasonably request to qualify the Securities  and the shares of Stock issuable upon conversion of the
Securities for offering and sale under the securities laws of such
jurisdictions as you may request and to comply with such laws so as to permit
the continuance of sales and dealings therein in such jurisdictions for as long
as may be necessary to complete the distribution of the Securities, provided
that in connection therewith the Company shall not be required to (i) qualify
as a foreign corporation, (ii) to file a general consent to service of
process in any jurisdiction, (iii) subject itself to taxation in any such
jurisdiction if it is not otherwise so subject or (iv) make any change to
its Certificate of Incorporation or By-laws;


 


(c)                  To furnish the Purchasers
with written  and electronic copies thereof in
such quantities as you may from time to time reasonably request, and if, at any
time prior to the expiration of nine months after the date of the Offering
Circular, any event shall have occurred as a result of which the Offering
Circular as then amended or supplemented would include an untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements therein, in light of the circumstances under which they were made
when such Offering Circular is delivered, not misleading, or, if for any other
reason it shall be necessary or desirable during such same period to amend or
supplement the Offering Circular, to notify you and upon your request to
prepare and furnish without charge to each Purchaser and to any dealer in
securities as many written  and electronic
copies as you may from time to time reasonably request of an amended Offering
Circular or a supplement to the Offering Circular which will correct such
statement or omission or effect such compliance;


 


(d)                     During the period beginning
from the date hereof and continuing until the date 90 days after such Time of
Delivery, not to offer, pledge, sell, contract to sell or otherwise dispose of,
except as provided hereunder, any securities of the Company that are
substantially similar to 


 


10
















 


the Securities or the Stock,
including but not limited to any securities that are convertible into or
exchangeable for, or that represent the right to receive, Stock or any such
substantially similar securities (other than pursuant to employee stock option
plans existing on, or upon the conversion or exchange of convertible or
exchangeable securities outstanding as of, the date of this Agreement), without
your prior written consent;


 


(e)                      Not to be or
become, at any time prior to the expiration of two years after such Time of
Delivery, an open-end investment company, unit investment trust, closed-end
investment company or face-amount certificate company that is or is required to
be registered under Section 8 of the Investment Company Act;


 


(f)                        At any time when
the Company is not subject to Section 13 or 15(d) of the Exchange Act
and the Securities are “restricted securities” within the meaning of Rule 144(a)(3) under
the Act, for the benefit of holders from time to time of Securities, to furnish
at its expense, upon request, to holders of Securities and prospective
purchasers of securities information (the “Additional Issuer Information”)
satisfying the requirements of subsection (d)(4)(i) of Rule 144A
under the Act;


 


(g)                     Except for such documents
that are publicly available on EDGAR, to furnish to the holders of the
Securities as soon as practicable after the end of each fiscal year an annual
report (including a balance sheet and statements of income, stockholders’
equity and cash flows of the Company and its consolidated subsidiaries
certified by independent public accountants) and, as soon as practicable after
the end of each of the first three quarters of each fiscal year (beginning with
the fiscal quarter ending after the date of the Offering Circular), to make
available to its stockholders consolidated summary financial information of the
Company and its subsidiaries for such quarter in reasonable detail;


 


(h)                     During the one-year period
after such Time of Delivery, the Company will not, and will not permit any of
its “affiliates” (as defined in Rule 144 under the Securities Act) (which
expressly does not include GS Direct) to, resell any of the Securities  which constitute “restricted securities” under Rule 144
that have been reacquired by any of them;


 


(i)                         To use the net
proceeds received by it from the sale of the Securities pursuant to this
Agreement in the manner specified in the Pricing Circular and Offering Circular
under the caption “Use of Proceeds”;


 


(j)                         To reserve and
keep available at all times, free of preemptive rights, shares of Stock for the
purpose of enabling the Company to satisfy any obligations to issue shares of
its Stock upon conversion of the Securities; and


 


(k)                      To use its
commercially reasonable efforts to list, subject to notice of issuance, the
shares of Stock issuable upon conversion of the Securities on the New York
Stock Exchange.


 


6.


 


(a)                      (i)  The
Company represents and agrees that, without the prior consent of Goldman, Sachs &
Co., it has not made and will not make any offer relating to the Securities
that, if the offering of the Securities contemplated by this Agreement were
conducted as a public offering pursuant to a registration statement filed under
the Act with the Commission, would constitute an “issuer free writing prospectus,”
as defined in Rule 433 under the Act (any such offer is hereinafter
referred to as a “Company Supplemental Disclosure Document”);


 


11

















 


(ii)  each Purchaser
represents and agrees that, without the prior consent of the Company and
Goldman, Sachs & Co., other than one or more term sheets relating to
the Securities containing customary information and conveyed to purchasers of
securities, it has not made and will not make any offer relating to the Securities
that, if the offering of the Securities contemplated by this Agreement were
conducted as a public offering pursuant to a registration statement filed under
the Act with the Commission, would constitute a “free writing prospectus,” as
defined in Rule 405 under the Act (any such offer (other than any such
term sheets), is hereinafter referred to as a “Purchaser Supplemental
Disclosure Document”); and


 


(iii)                   any Company Supplemental
Disclosure Document or Purchaser Supplemental Disclosure Document the use of
which has been consented to by the Company and Goldman, Sachs & Co. is
listed on Schedule II(b) hereto;


 


7.                           The Company
covenants and agrees with the several Purchasers that the Company will pay or
cause to be paid the following: (i) the fees, disbursements and expenses
of the Company’s counsel and accountants in connection with the issue of the
Securities  and the shares of Stock issuable upon
conversion of the Securities and all other expenses in connection with the
preparation, printing, reproduction and filing of the Preliminary Offering
Circular and the Offering Circular and any amendments and supplements thereto
and the mailing and delivering of copies thereof to the Purchasers and dealers;
(ii) the cost of printing or producing any Agreement among Purchasers,
this Agreement, the Indenture, the blue sky memorandum related to the offering,
closing documents (including any compilations thereof) and any other documents
in connection with the offering, purchase, sale and delivery of the Securities;
(iii) all expenses in connection with the qualification of the Securities  and the shares of Stock issuable upon conversion of the
Securities for offering and sale under state securities laws as provided in Section 5(b) hereof,
including the documented and reasonable fees and disbursements of counsel for
the Purchasers in connection with such qualification and in connection with the
Blue Sky and legal investment surveys; (iv) any fees charged by securities
rating services for rating the Securities; (v) the cost of preparing the
Securities; (vi) the fees and expenses of the Trustee and any agent of the
Trustee  and the fees and disbursements of
counsel for the Trustee  in connection
with the Indenture and the Securities, and the listing of the shares of Stock
issuable upon conversion of the Securities; and (vii) all other reasonable
costs and expenses incident to the performance of its obligations hereunder
which are not otherwise specifically provided for in this Section.  It is understood, however, that, except as provided
in this Section, and Sections 9 and 12 hereof, the Purchasers will pay all of
their own costs and expenses, including the fees of their counsel, transfer
taxes on resale of any of the Securities  by them, and
any advertising expenses connected with any offers they may make.


 


8.               The obligations of the
Purchasers hereunder shall be subject, in their discretion, to the condition
that all representations and warranties and other statements of the Company
herein are, at and as of each Time of Delivery, true and correct, the condition
that the Company shall have performed all of its obligations hereunder
theretofore to be performed, and the following additional conditions:


 


(a)                      Latham &
Watkins LLP, counsel for the Purchasers, shall have furnished to you such
written opinion or opinions, dated such Time of Delivery, in form and substance
reasonably 


 


12

















 


acceptable to you, and such
counsel shall have received such papers and information as they may
reasonably request to enable them to pass upon such matters;


 


(b)                     Dechert LLP, counsel for the
Company, shall have furnished to you their written opinion, dated the Time of
Delivery, substantially in the form attached hereto as Exhibit A;


 


(c)                      On the date of
the Pricing Circular prior to the execution of this Agreement and also at each
Time of Delivery, Grant Thornton LLP shall have furnished to you a letter or
letters, dated the respective dates of delivery thereof, in form and substance
satisfactory to you, to the effect set forth in Annex I hereto;


 


(d)                     (i) Neither the Company
nor any of its subsidiaries shall have sustained since the date of the latest
audited financial statements included in the Pricing Circular and Offering
Circular any loss or interference with its business from fire, explosion, flood
or other calamity, whether or not covered by insurance, or from any labor
dispute or court or governmental action, order or decree, otherwise than as set
forth or contemplated in the Pricing Circular and Offering Circular, and (ii) since
the respective dates as of which information is given in the Pricing Circular
and Offering Circular there shall not have been any change in the capital stock
or long-term debt of the Company or any of its subsidiaries or any change, or
any development involving a prospective change, in or affecting the general
affairs, management, financial position, stockholders’ equity or results of
operations of the Company and its subsidiaries, otherwise than as set forth or
contemplated in the Pricing Circular and Offering Circular, the effect of
which, in any such case described in clause (i) or (ii), is in your
judgment so material and adverse as to make it impracticable or inadvisable to
proceed with the offering or the delivery of the Securities being issued at
such Time of Delivery on the terms and in the manner contemplated in this
Agreement and in the Offering Circular;


 


(e)                      On or after the
Applicable Time (i) no downgrading shall have occurred in the rating
accorded the Company’s debt securities by any “nationally recognized
statistical rating organization”, as that term is defined by the Commission for
purposes of Rule 436(g)(2) under the Act, and (ii) no such
organization shall have publicly announced that it has under surveillance or
review, with possible negative implications, its rating of any of the Company’s
debt securities;


 


(f)                        On or after the
Applicable Time there shall not have occurred any of the following: (i) a
suspension or material limitation in trading in securities generally on the New
York Stock Exchange; (ii) a suspension or material limitation in trading
in the Company’s securities on the New York Stock Exchange; (iii) a
general moratorium on commercial banking activities declared by either Federal
or New York State authorities or a material disruption in commercial banking or
securities settlement or clearance services in the United States; (iv) the
outbreak or escalation of hostilities involving the United States or the
declaration by the United States of a national emergency or war or (v) the
occurrence of any other calamity or crisis or any change in financial,
political or economic conditions in the United States or elsewhere, if the
effect of any such event specified in clause (iv) or (v) in your
judgment makes it impracticable or inadvisable to proceed with the offering or
the delivery of the Securities being issued at such Time of Delivery on the
terms and in the manner contemplated in the Offering Circular;


 


(g)                     The Company
shall have made application for the shares of Stock issuable upon conversion of
the Securities, subject to notice of issuance, on the Exchange;


 


13

















 


(h)                     The Company
shall have obtained and delivered to the Purchasers on or prior to the date of
this Agreement executed copies of an agreement from all directors and officers  of the Company listed in Schedule IV, substantially to the
effect set forth in Annex II hereof; and


 


(i)                         The Company
shall have furnished or caused to be furnished to you at each Time of Delivery
certificates of officers of the Company satisfactory to you as to the accuracy
of the representations and warranties of the Company herein at and as of such
Time of Delivery, as to the performance by the Company of all of its
obligations hereunder to be performed at or prior to such Time of Delivery, as
to the matters set forth in subsection (f) of this Section and as to
such other matters as you may reasonably request.


 


9.               (a)       The Company will indemnify and hold harmless each Purchaser
against any losses, claims, damages or liabilities, joint or several, to which
such Purchaser may become subject, under the Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise
out of or are based upon an untrue statement or alleged untrue statement of a
material fact contained in any Preliminary Offering Circular,  the Pricing Circular, the Offering Circular, or any
amendment or supplement thereto, any Company Supplemental Disclosure Document,
or arise out of or are based upon the omission or alleged omission to state
therein a material fact necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading, and will
reimburse each Purchaser for any legal or other expenses reasonably incurred by
such Purchaser in connection with investigating or defending any such action or
claim as such expenses are incurred; provided, however, that the Company shall not be liable in any such
case to the extent that any such loss, claim, damage or liability arises out of
or is based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in any Preliminary Offering Circular,  the
Pricing Circular, the Offering Circular or any such amendment or supplement, or
any Company Supplemental Disclosure Document, in reliance upon and in
conformity with written information furnished to the Company by any Purchaser
through Goldman, Sachs & Co. expressly for use therein.


 


(b)                     Each Purchaser will
indemnify and hold harmless the Company against any losses, claims, damages or
liabilities to which the Company may become subject, under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions
in respect thereof) arise out of or are based upon an untrue statement or
alleged untrue statement of a material fact contained in any Preliminary
Offering Circular, the Pricing Circular, the Offering Circular, or any
amendment or supplement thereto, or any Company Supplemental Disclosure
Document, or arise out of or are based upon the omission or alleged omission to
state therein a material fact or necessary to make the statements therein not
misleading, in each case to the extent, but only to the extent, that such
untrue statement or alleged untrue statement or omission or alleged omission
was made in any Preliminary Offering Circular, the Pricing Circular, the
Offering Circular or any such amendment or supplement, or any Company
Supplemental Disclosure Document in reliance upon and in conformity with
written information furnished to the Company by such Purchaser through Goldman,
Sachs & Co. expressly for use therein; and will reimburse the Company
for any legal or other expenses reasonably incurred by the Company in
connection with investigating or defending any such action or claim as such
expenses are incurred.


 


(c)                      Promptly after
receipt by an indemnified party under subsection (a) or (b) above of
notice of the commencement of any action, such indemnified party shall, if a
claim in respect thereof is to be made against the indemnifying party under
such subsection, notify the indemnifying 


 


14

















 


party in writing of the
commencement thereof; but the omission so to notify the indemnifying party
shall not relieve it from any liability which it may have to any indemnified
party otherwise than under such subsection, except to the extent that the
indemnifying party suffers actual prejudice as a result of such failure.  In case any such action shall be brought against
any indemnified party and it shall notify the indemnifying party of the commencement
thereof, the indemnifying party shall be entitled to participate therein and,
to the extent that it shall wish, jointly with any other indemnifying party
similarly notified, to assume the defense thereof, with counsel satisfactory to
such indemnified party (who shall not, except with the consent of the
indemnified party, be counsel to the indemnifying party), and, after notice
from the indemnifying party to such indemnified party of its election so to
assume the defense thereof, the indemnifying party shall not be liable to such
indemnified party under such subsection for any legal expenses of other counsel
or any other expenses, in each case subsequently incurred by such indemnified
party, in connection with the defense thereof other than reasonable costs of
investigation.  No indemnifying party
shall, without the written consent of the indemnified party, effect the
settlement or compromise of, or consent to the entry of any judgment with
respect to, any pending or threatened action or claim in respect of which
indemnification or contribution may be sought hereunder (whether or not the
indemnified party is an actual or potential party to such action or claim)
unless such settlement, compromise or judgment (i) includes an
unconditional release of the indemnified party from all liability arising out
of such action or claim and (ii) does not include a statement as to, or an
admission of, fault, culpability or a failure to act, by or on behalf of any
indemnified party.  The indemnifying
party shall not be required to indemnify any indemnified party for any amount
paid or payable by such indemnified party in settlement of any action, proceeding
or investigation without the written consent of the indemnifying party, which
consent shall not be unreasonably withheld.


 


(d)                     If the indemnification
provided for in this Section 9 is unavailable to or insufficient to hold
harmless an indemnified party under subsection (a) or (b) above in
respect of any losses, claims, damages or liabilities (or actions in respect
thereof) referred to therein, then each indemnifying party shall contribute to
the amount paid or payable by such indemnified party as a result of such
losses, claims, damages or liabilities (or actions in respect thereof) in such
proportion as is appropriate to reflect the relative benefits received by the
Company on the one hand and the Purchasers on the other from the offering of
the Securities.  If, however, the
allocation provided by the immediately preceding sentence is not permitted by
applicable law or if the indemnified party failed to give the notice required
under subsection (c) above, then each indemnifying party shall contribute
to such amount paid or payable by such indemnified party in such proportion as
is appropriate to reflect not only such relative benefits but also the relative
fault of the Company on the one hand and the Purchasers on the other in
connection with the statements or omissions which resulted in such losses,
claims, damages or liabilities (or actions in respect thereof), as well as any
other relevant equitable considerations (including any failure by the
indemnified party to provide any notice specified above).  The relative benefits received by the Company
on the one hand and the Purchasers on the other shall be deemed to be in the
same proportion as the total net proceeds from the offering (before deducting
expenses) received by the Company bear to the total underwriting discounts and
commissions received by the Purchasers, in each case as set forth in the
Offering Circular.  The relative fault
shall be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged omission
to state a material fact relates to information supplied by the 


 


15

















 


Company on the one hand or
the Purchasers on the other and the parties’ relative intent, knowledge, access
to information and opportunity to correct or prevent such statement or
omission.  The Company and the Purchasers
agree that it would not be just and equitable if contribution pursuant to this
subsection (d) were determined by pro rata allocation (even if the
Purchasers were treated as one entity for such purpose) or by any other method
of allocation which does not take account of the equitable considerations
referred to above in this subsection (d). 
The amount paid or payable by an indemnified party as a result of the
losses, claims, damages or liabilities (or actions in respect thereof) referred
to above in this subsection (d) shall be deemed to include any legal or
other expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim.  Notwithstanding the provisions of this
subsection (d), no Purchaser shall be required to contribute any amount in
excess of the amount by which the total price at which the Securities
underwritten by it and distributed to investors were offered to investors
exceeds the amount of any damages which such Purchaser has otherwise been
required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission. The Purchasers’ obligations in this subsection (d) to
contribute are several in proportion to their respective underwriting
obligations and not joint.


 


(e)                      The obligations
of the Company under this Section 9 shall be in addition to any liability
which the Company may otherwise have and shall extend, upon the same terms and
conditions, to any affiliate of each Purchaser and each person, if any, who
controls any Purchaser within the meaning of the Act; and the obligations of
the Purchasers under this Section 9 shall be in addition to any liability
which the respective Purchasers may otherwise have and shall extend, upon the
same terms and conditions, to each officer and director of the Company and to
each person, if any, who controls the Company within the meaning of the Act.


 


10.         (a)                      If any
Purchaser shall default in its obligation to purchase the Securities which it
has agreed to purchase hereunder, you may in your discretion arrange for you or
another party or other parties to purchase such Securities on the terms
contained herein at a Time of Delivery. 
If within thirty-six hours after such default by any Purchaser you do
not arrange for the purchase of such Securities, then the Company shall be
entitled to a further period of thirty-six hours within which to procure
another party or other parties satisfactory to you to purchase such Securities
on such terms.  In the event that, within
the respective prescribed periods, you notify the Company that you have so
arranged for the purchase of such Securities, or the Company notifies you that
it has so arranged for the purchase of such Securities, you or the Company
shall have the right to postpone the Time of Delivery for a period of not more
than seven days, in order to effect whatever changes may thereby be made
necessary in the Offering Circular, or in any other documents or arrangements,
and the Company agrees to prepare promptly any amendments to the Offering
Circular which in your opinion may thereby be made necessary.  The term “Purchaser” as used in this
Agreement shall include any person substituted under this Section with
like effect as if such person had originally been a party to this Agreement
with respect to such Securities.


 


(b)                     If, after giving effect to
any arrangements for the purchase of the Securities of a defaulting Purchaser
or Purchasers by you and the Company as provided in subsection (a) above,
the aggregate principal amount of such Securities which remains unpurchased
does not exceed one-eleventh of the aggregate principal amount of all the
Securities, then the Company shall have the right to require each
non-defaulting Purchaser to purchase the principal amount of Securities which
such Purchaser agreed to purchase hereunder and, in addition, to require 


 


16

















 


each non-defaulting
Purchaser to purchase its pro rata share (based on the principal amount of
Securities which such Purchaser agreed to purchase hereunder) of the Securities
of such defaulting Purchaser or Purchasers for which such arrangements have not
been made; but nothing herein shall relieve a defaulting Purchaser from
liability for its default.


 


(c)                      If, after
giving effect to any arrangements for the purchase of the Securities of a
defaulting Purchaser or Purchasers by you and the Company as provided in
subsection (a) above, the aggregate principal amount of Securities which
remains unpurchased exceeds one-eleventh of the aggregate principal amount of
all the Securities to be purchased at such Time of Delivery, or if the Company
shall not exercise the right described in subsection (b) above to require
non-defaulting Purchasers to purchase Securities of a defaulting Purchaser or
Purchasers, then this Agreement (or, with respect to an Optional Time of
Delivery, the obligation of the Purchasers to purchase and of the Company to
sell Optional Securities) shall thereupon terminate, without liability on the
part of any non-defaulting Purchaser or the Company, except for the expenses to
be borne by the Company and the Purchasers as provided in Section 6 hereof
and the indemnity and contribution agreements in Section 9 hereof; but
nothing herein shall relieve a defaulting Purchaser from liability for its
default.


 


11.         The respective indemnities,
agreements, representations, warranties and other statements of the Company and
the several Purchasers, as set forth in this Agreement or made by or on behalf
of them, respectively, pursuant to this Agreement, shall remain in full force
and effect, regardless of any investigation (or any statement as to the results
thereof) made by or on behalf of any Purchaser or any controlling person of any
Purchaser, or the Company, or any officer or director or controlling person of
the Company, and shall survive delivery of and payment for the Securities.


 


12.         If this Agreement shall be
terminated pursuant to Section 10 hereof, the Company shall not then be
under any liability to any Purchaser except as provided in Sections 7 and 9
hereof; but, if for any other reason, the Securities are not delivered by or on
behalf of the Company as provided herein, the Company will reimburse the Purchasers
through you for all expenses approved in writing by you, including fees and
disbursements of counsel, reasonably incurred by the Purchasers in making
preparations for the purchase, sale and delivery of the Securities, but the
Company shall then be under no further liability to any Purchaser except as
provided in Sections 7 and 9 hereof.


 


13.         In all dealings hereunder,
you shall act on behalf of each of the Purchasers, and the parties hereto shall
be entitled to act and rely upon any statement, request, notice or agreement on
behalf of any Purchaser made or given by you.


 


All
statements, requests, notices and agreements hereunder shall be in writing, and
if to the Purchasers shall be delivered or sent by mail, telex or facsimile
transmission to you as the representatives in care of Goldman, Sachs &
Co., 200 West Street, New York, New York 10282, Attention:
Registration Department; and if to the Company shall be delivered or sent by
mail, telex or facsimile transmission to the address of the Company set forth
in the Offering Circular, Attention: Secretary; provided,
however, that any notice to a Purchaser
pursuant to Section 9(c) hereof shall be delivered or sent by mail,
telex or facsimile transmission to such Purchaser at its address set forth in
its Purchasers’ Questionnaire, or telex constituting such Questionnaire, which
address will be supplied to the Company by you upon request.  Any such statements, requests, notices or
agreements shall take effect upon receipt thereof.


 


In accordance with the requirements of the USA
Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26,
2001)), the initial purchasers are required to obtain, verify and record
information that 


 


17

















 


identifies their respective clients, including
the Company, which information may include the name and address of their
respective clients, as well as other information that will allow the initial
purchasers to properly identify their respective clients.


 


14.         This Agreement shall be
binding upon, and inure solely to the benefit of, the Purchasers, the Company
and, to the extent provided in Sections 9 and 11 hereof, the officers and
directors of the Company and each person who controls the Company or any
Purchaser, and their respective heirs, executors, administrators, successors
and assigns, and no other person shall acquire or have any right under or by
virtue of this Agreement. No purchaser of any of the Securities  from any Purchaser shall be deemed a successor or assign by
reason merely of such purchase.


 


15.         Time shall be of the essence
of this Agreement.


 


16.         The Company acknowledges and
agrees that (i) the purchase and sale of the Securities pursuant to this
Agreement is an arm’s-length commercial transaction between the Company, on the
one hand, and the several Purchasers, on the other, (ii) in connection
therewith and with the process leading to such transaction each Purchaser is
acting solely as a principal and not the agent or fiduciary of the Company, (iii) no
Purchaser has assumed an advisory or fiduciary responsibility in favor of the
Company with respect to the offering contemplated hereby or the process leading
thereto (irrespective of whether such Purchaser has advised or is currently
advising the Company on other matters) or any other obligation to the Company
except the obligations expressly set forth in this Agreement and (iv) the
Company has consulted its own legal and financial advisors to the extent it
deemed appropriate.  The Company agrees
that it will not claim that the Purchaser, or any of them, has rendered
advisory services of any nature or respect, or owes a fiduciary or similar duty
to the Company, in connection with such transaction or the process leading
thereto.


 


17. This Agreement (i) amends
and restates in its entirety that certain purchase agreement earlier entered
into on December 15, 2009 by and between the Company and Goldman, Sachs &
Co. and (ii) supersedes all prior agreements and understandings (whether
written or oral) between the Company and the Purchasers, or any of them, with
respect to the subject matter hereof.


 


18.  THIS
AGREEMENT AND ANY MATTERS RELATED TO THIS TRANSACTION SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD
TO PRINCIPLES OF CONFLICT OF LAWS THAT WOULD RESULT IN THE APPLICATION OF ANY
LAW OTHER THAN THE LAWS OF THE STATE OF NEW YORK.  The Company and the
Purchasers agree that any suit or proceeding arising in respect of this
agreement or our engagement will be tried exclusively in the U.S. District
Court for the Southern District of New York or, if that court does not have
subject matter jurisdiction, in any state court located in The City and County
of New York and the Company and the Purchasers agree to submit to the jurisdiction
of, and to venue in, such courts.


 


19.         The Company and each of the
Purchasers hereby irrevocably waive, to the fullest extent permitted by
applicable law, any and all right to trial by jury in any legal proceeding
arising out of or relating to this Agreement or the transactions contemplated
hereby.


 


20.         This Agreement may be
executed by any one or more of the parties hereto in any number of
counterparts, each of which shall be deemed to be an original, but all such
respective counterparts shall together constitute one and the same instrument.


 


21.         Notwithstanding
anything herein to the contrary, the Company (and the Company’s employees,
representatives, and other agents) are authorized to disclose to any and all
persons, the tax 


 


18

















 


treatment and tax structure of the
potential transaction and all materials of any kind (including tax opinions and
other tax analyses) provided to the Company relating to that treatment and
structure, without the Purchasers’ imposing any limitation of any kind.
However, any information relating to the tax treatment and tax structure shall
remain confidential (and the foregoing sentence shall not apply) to the extent
necessary to enable any person to comply with securities laws. For this
purpose, “tax treatment” means U.S. federal and state income tax treatment, and
“tax structure” is limited to any facts that may be relevant to that treatment.


 


If
the foregoing is in accordance with your understanding, please sign and return
to us one for the Company and the Representative plus one for each counsel
counterparts hereof, and upon the acceptance hereof by you, on behalf of each
of the Purchasers, this letter and such acceptance hereof shall constitute a
binding agreement between each of the Purchasers and the Company.  It is understood that your acceptance of this
letter on behalf of each of the Purchasers is pursuant to the authority set
forth in a form of Agreement among Purchasers, the form of which shall be
submitted to the Company for examination upon request, but without warranty on
your part as to the authority of the signers thereof.


 


[Signature Page Follows]


 


19

















 


Very truly yours,


 


	
   

  	
  Griffon Corporation

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Douglas J. Wetmore

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
  Accepted as of the date
  hereof:

  	
   

  
	
   

  	
   

  
	
  Goldman,
  Sachs & Co.

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Goldman,
  Sachs & Co.

  	
   

  
	
   

  	
  (Goldman, Sachs &
  Co.)

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  On behalf of each of the
  Purchasers

  	
   

  



 


20
















 


SCHEDULE I


 


	
  Purchaser

  	
   

  	
  Principal

  Amount of

  Securities to be

  Purchased 

  	
   

  	
  Aggregate

  Principal

  Amount of

  Optional

  Securities to

  be Purchased

  if Maximum

  Option

  Exercised

  	
   

  
	
  Goldman, Sachs &
  Co.

  	
   

  	
  $

  	
  70,000,000

  	
   

  	
  $

  	
  10,500,000

  	
   

  
	
  Deutsche Bank Securities
  Inc.

  	
   

  	
  20,000,000

  	
   

  	
  3,000,000

  	
   

  
	
  Wells Fargo Securities,
  LLC.

  	
   

  	
  10,000,000

  	
   

  	
  1,500,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Total

  	
   

  	
  $

  	
  100,000,000

  	
   

  	
  $

  	
  15,000,000

  	
   

  



 


I-1

















 


SCHEDULE II


 


(a)                                  Additional Documents Incorporated by
Reference:  Current Report on Form 8-K
filed with the SEC on December 16, 2009.


 


(b)                                 Approved Supplemental Disclosure
Documents:


 


1.               Offering Summary Term Sheet delivered to certain
investors on December 14, 2009.


 


2.               Offering Summary Term Sheet delivered to certain
investors on December 15, 2009.


 


II-1

















 


SCHEDULE III


 


Final Term Sheet


 


Dated December 16, 2009


 


GRIFFON CORPORATION

4.00% CONVERTIBLE SUBORDINATED NOTES DUE 2017


 


The information in
this term sheet supplements Griffon Corporation’s preliminary offering
circular, dated December 15, 2009 (the “Preliminary Offering Circular”),
and supersedes the information in the Preliminary Offering Circular to the
extent inconsistent with the information in the Preliminary Offering
Circular.  Terms used in this term sheet
but not defined have the respective meanings given to them in the Preliminary
Offering Circular.


 


	
  Issuer:

  	
   

  	
  Griffon Corporation, a Delaware corporation
  (NYSE:  “GFF”)

  
	
   

  	
   

  	
   

  
	
  Title of Securities:

  	
   

  	
  4.00% Convertible Subordinated Notes Due 2017

  
	
   

  	
   

  	
   

  
	
  Aggregate Principal Amount Offered: 

  	
   

  	
  $100,000,000 (excluding the initial purchasers’
  option to purchase up to $15,000,000 aggregate principal amount of additional
  notes within 30 days after the date of the original issuance of the notes
  solely to cover over-allotments)

  
	
   

  	
   

  	
   

  
	
  Net proceeds:

  	
   

  	
  Approximately $95.9 million (or approximately $110.4
  million if the initial purchasers exercise in full their option to purchase
  additional notes), after deducting the initial purchasers’ discounts and
  commissions and the expected expenses of this offering

  
	
   

  	
   

  	
   

  
	
  Maturity:

  	
   

  	
  January 15, 2017

  
	
   

  	
   

  	
   

  
	
  Annual Interest Rate:

  	
   

  	
  4.00% per year, payable semi-annually in arrears in
  cash and accruing from the date of original issuance

  
	
   

  	
   

  	
   

  
	
  Issue Price:

  	
   

  	
  100%

  
	
   

  	
   

  	
   

  
	
  Interest Payment Dates:

  	
   

  	
  Each January 15 and July 15, beginning on
  July 15, 2010

  
	
   

  	
   

  	
   

  
	
  Interest Payment Record Dates:

  	
   

  	
  The January 1 or July 1, as applicable,
  immediately preceding each Interest Payment Date

  
	
   

  	
   

  	
   

  
	
  Method of Distribution:

  	
   

  	
  144A

  



 


III-1

















 


	
  Initial Conversion Rate:

  	
   

  	
  67.0799 shares of Griffon Corporation common stock
  per $1,000 principal amount of notes

  
	
   

  	
   

  	
   

  
	
  Reference Price:

  	
   

  	
  $12.12  per share of
  Griffon Corporation common stock

  
	
   

  	
   

  	
   

  
	
  Conversion Premium:

  	
   

  	
  Approximately 23.00% above the Reference Price

  
	
   

  	
   

  	
   

  
	
  Initial Conversion Price:

  	
   

  	
  Approximately $14.9076 per share of Griffon
  Corporation common stock

  
	
   

  	
   

  	
   

  
	
  Sole Book-Running Manager:

  	
   

  	
  Goldman, Sachs & Co.

  
	
   

  	
   

  	
   

  
	
  Trade Date:

  	
   

  	
  December 16, 2009

  
	
   

  	
   

  	
   

  
	
  Settlement Date:

  	
   

  	
  December 21, 2009

  
	
   

  	
   

  	
   

  
	
  CUSIP/ISIN:

  	
   

  	
  Restricted CUSIP Number:  398433 AD4 

   

  Restricted ISIN Number:  US398433AD42

  
	
   

  	
   

  	
   

  
	
  Adjustment to Conversion Rate upon a Fundamental
  Change:

  	
   

  	
  The following table sets forth effective dates,
  share prices and the number of additional shares per $1,000 principal amount
  of notes by which the conversion rate will be increased for a fundamental
  change having such effective date and share price:

  



 


	
  Effective

  	
   

  	
  Share Price

  	
   

  
	
  Date

  	
   

  	
  $ 12.12 

  	
   

  	
  $ 15.00 

  	
   

  	
  $ 20.00 

  	
   

  	
  $ 25.00 

  	
   

  	
  $ 30.00 

  	
   

  	
  $ 35.00 

  	
   

  	
  $ 40.00 

  	
   

  	
  $ 50.00 

  	
   

  	
  $ 60.00 

  	
   

  	
  $ 70.00 

  	
   

  	
  $ 80.00 

  	
   

  	
  $ 90.00 

  	
   

  	
  $ 100.00

  	
   

  
	
  December 21, 2009

  	
   

  	
  15.4284

  	
   

  	
  14.9853

  	
   

  	
  9.9916

  	
   

  	
  7.4293

  	
   

  	
  5.8704

  	
   

  	
  4.8135

  	
   

  	
  4.0447

  	
   

  	
  2.9947

  	
   

  	
  2.3083

  	
   

  	
  1.8247

  	
   

  	
  1.4671

  	
   

  	
  1.1933

  	
   

  	
  0.9783

  	
   

  
	
  January 15, 2010

  	
   

  	
  15.4284

  	
   

  	
  14.8634

  	
   

  	
  9.8981

  	
   

  	
  7.3563

  	
   

  	
  5.8123

  	
   

  	
  4.7656

  	
   

  	
  4.0049

  	
   

  	
  2.9655

  	
   

  	
  2.2859

  	
   

  	
  1.8071

  	
   

  	
  1.4528

  	
   

  	
  1.1815

  	
   

  	
  0.9684

  	
   

  
	
  January 15, 2011

  	
   

  	
  15.4284

  	
   

  	
  13.3619

  	
   

  	
  8.7300

  	
   

  	
  6.4434

  	
   

  	
  5.0800

  	
   

  	
  4.1640

  	
   

  	
  3.5002

  	
   

  	
  2.5930

  	
   

  	
  1.9985

  	
   

  	
  1.5784

  	
   

  	
  1.2668

  	
   

  	
  1.0276

  	
   

  	
  0.8393

  	
   

  
	
  January 15, 2012

  	
   

  	
  15.4284

  	
   

  	
  11.9534

  	
   

  	
  7.5829

  	
   

  	
  5.5421

  	
   

  	
  4.3577

  	
   

  	
  3.5711

  	
   

  	
  3.0029

  	
   

  	
  2.2266

  	
   

  	
  1.7166

  	
   

  	
  1.3551

  	
   

  	
  1.0863

  	
   

  	
  0.8793

  	
   

  	
  0.7161

  	
   

  
	
  January 15, 2013

  	
   

  	
  15.4284

  	
   

  	
  10.6134

  	
   

  	
  6.4346

  	
   

  	
  4.6328

  	
   

  	
  3.6326

  	
   

  	
  2.9788

  	
   

  	
  2.5084

  	
   

  	
  1.8652

  	
   

  	
  1.4413

  	
   

  	
  1.1399

  	
   

  	
  0.9149

  	
   

  	
  0.7410

  	
   

  	
  0.6033

  	
   

  
	
  January 15, 2014

  	
   

  	
  15.1980

  	
   

  	
  9.2072

  	
   

  	
  5.1637

  	
   

  	
  3.6308

  	
   

  	
  2.8339

  	
   

  	
  2.3237

  	
   

  	
  1.9575

  	
   

  	
  1.4554

  	
   

  	
  1.1231

  	
   

  	
  0.8862

  	
   

  	
  0.7088

  	
   

  	
  0.5712

  	
   

  	
  0.4618

  	
   

  
	
  January 15, 2015

  	
   

  	
  14.3638

  	
   

  	
  7.6256

  	
   

  	
  3.7119

  	
   

  	
  2.5250

  	
   

  	
  1.9704

  	
   

  	
  1.6207

  	
   

  	
  1.3678

  	
   

  	
  1.0178

  	
   

  	
  0.7852

  	
   

  	
  0.6190

  	
   

  	
  0.4945

  	
   

  	
  0.3976

  	
   

  	
  0.3202

  	
   

  
	
  January 15, 2016

  	
   

  	
  13.7815

  	
   

  	
  5.5387

  	
   

  	
  1.9287

  	
   

  	
  1.2765

  	
   

  	
  1.0088

  	
   

  	
  0.8319

  	
   

  	
  0.7004

  	
   

  	
  0.5165

  	
   

  	
  0.3938

  	
   

  	
  0.3062

  	
   

  	
  0.2405

  	
   

  	
  0.1894

  	
   

  	
  0.1486

  	
   

  
	
  January 15, 2017

  	
   

  	
  15.4284

  	
   

  	
  0.0000

  	
   

  	
  0.0000

  	
   

  	
  0.0000

  	
   

  	
  0.0000

  	
   

  	
  0.0000

  	
   

  	
  0.0000

  	
   

  	
  0.0000

  	
   

  	
  0.0000

  	
   

  	
  0.0000

  	
   

  	
  0.0000

  	
   

  	
  0.0000

  	
   

  	
  0.0000

  	
   

  



 


III-2

















 


The exact share prices and effective dates may not be
set forth in the table above, in which case:


 


·                  If the share price is between two share prices listed
in the table or the effective date is between two effective dates listed in the
table, the number of additional shares will be determined by a straight-line
interpolation between the number of additional shares set forth for the higher
and lower share price amounts listed in the table and the two effective dates
listed in the table, as applicable, based on a 365-day year.


 


·                  If the share price is greater than $100.00 per share,
subject to adjustment, the conversion rate will not be adjusted.


 


·                  If the share price is less than $12.12  per share (the closing price of the common stock on the
date hereof), subject to adjustment, the conversion rate will not be adjusted.


 


Notwithstanding the foregoing, in no event will the
total number of shares of our common stock issuable upon conversion exceed
82.5083 shares per $1,000 principal amount of notes, subject to adjustments in
the same manner as the conversion rate as set forth in the Preliminary Offering
Circular under “Description of Notes—Conversion Rate Adjustments.”


 


Capitalization


 


The following
table shows, in each case, as of September 30, 2009 our capitalization on
an (i) actual basis and (ii) as adjusted basis to give effect to this
offering and the assumed application of the estimated net proceeds therefrom.
See ‘‘Use of Proceeds’’ for additional detail on the use of net proceeds from
the issuance of the notes. The table assumes the initial purchasers do not
exercise their over-allotment option to purchase additional notes.


 


This table should
be read in conjunction with our consolidated audited financial statements and the
notes thereto in our Annual Report on Form 10-K for the year ended September 30,
2009. See ‘‘Incorporation By Reference.’’


 


	
   

  	
   

  	
  September 30, 2009

  	
   

  
	
   

  	
   

  	
  Actual

  	
   

  	
  As

  adjusted(1)

  	
   

  
	
   

  	
   

  	
  (in thousands)

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Cash and cash equivalents

  	
   

  	
  $

  	
  320,833

  	
   

  	
  $

  	
  416,733

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Debt:

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4.0% contingent
  convertible subordinated notes due 2023(2)(3)

  	
   

  	
  $

  	
  79,380

  	
   

  	
  $

  	
  79,380

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Note payable to banks
  - revolving credit facilities(4)

  	
   

  	
  73,925

  	
   

  	
  73,925

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Notes offered hereby(3)

  	
   

  	
  —

  	
   

  	
  100,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Other debt, including
  capital leases(5)

  	
   

  	
  26,499

  	
   

  	
  26,499

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Total debt

  	
   

  	
  $

  	
  179,804

  	
   

  	
  $

  	
  279,804

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Shareholders’ Equity:

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Preferred stock, par
  value $0.25 per share, authorized 3,000  shares, no shares issued

  	
   

  	
  —

  	
   

  	
  —

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Common stock, par value
  $0.25 per share, authorized 85,000  shares, issued 72,040 shares

  	
   

  	
  $

  	
  18,010

  	
   

  	
  $

  	
  18,010

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Capital in excess of par(3)

  	
   

  	
  420,749

  	
   

  	
  420,749

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Retained earnings

  	
   

  	
  438,782

  	
   

  	
  438,782

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Treasury shares, at cost,
  12,466 common shares

  	
   

  	
  (213,560

  	
  )

  	
  (213,560

  	
  )

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Accumulated other
  comprehensive income

  	
   

  	
  28,170

  	
   

  	
  28,170

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Deferred compensation

  	
   

  	
  (5,248

  	
  )

  	
  (5,248

  	
  )

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Total shareholders’
  equity

  	
   

  	
  $

  	
  686,903

  	
   

  	
  $

  	
  686,903

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Total capitalization

  	
   

  	
  $

  	
  866,707

  	
   

  	
  $

  	
  966,707

  	
   

  



 


III-3

















 






(1) The ‘‘as
adjusted’’ column is presented for illustrative purposes only. As described in ‘‘Use
of Proceeds,’’ the Company will add the net proceeds from the offering to its
existing cash balance of approximately $320.8 million at September 30,
2009, which we intend to use for general corporate purposes, including working
capital, the repayment or repurchase of corporate indebtedness, investment in
current segments and/or acquisitions of other businesses outside our current
portfolio.


 


(2) Represents
fair value of the 2023 notes, which is based upon market values. A holder of
2023 notes has the right to require us to repurchase all or a portion of its
2023 notes on July 18, 2010 at a purchase price in cash equal to 100% of
the aggregate principal payment of the 2023 notes on the date of purchase. If
the common stock price remains below the conversion price of $22.41 per share,
as adjusted for the September 2008 rights offering, the Company
anticipates that the holders of the 2023 notes will require the Company to
repurchase their outstanding 2023 notes in July 2010. In addition,
beginning on July 26, 2010, we may redeem the 2023 notes, in whole at any
time, or in part from time to time.


 


(3) Upon maturity,
the aggregate principal amount due will be $100.0 million. In May 2008,
the FASB issued new guidance to clarify that the liability and equity
components of convertible debt instruments that may be settled in cash upon
conversion (including partial cash settlement) must be separately accounted for
in a manner that will reflect the entity’s nonconvertible debt borrowing rate
when interest cost is recognized in subsequent periods. The new guidance is
effective for us as of October 1, 2009. The effect of this guidance on the
accounting for the notes and the 2023 notes is that the equity component will
be included in the capital in excess of par section of stockholders’ equity on
our consolidated balance sheet and the value of the equity


 


III-4
















 


component
would be treated as original issue discount for purposes of accounting for the
debt component of the notes.


 


(4) Consists of
amounts outstanding under Building Products’ and Plastics’ $100.0 million
senior secured revolving credit facility and Telephonics’ $100.0 million senior
secured revolving credit facility.


 


(5) Consists of
approximately $13.0 million of capital leases for real estate, $7.7 million of
real estate mortgages, $5.6 million under a loan agreement of the Company’s
Employee Stock Ownership Plan, which is guaranteed by us, and $0.2 million of
capital leases for equipment.


 


Relationship


 


GS Direct, L.L.C., an affiliate of The Goldman Sachs
Group Inc, is purchasing up to $6.5 million principal amount of notes in the
offering.


 


General


 


This communication is intended for the sole use of the
person to whom it is provided by the sender.


 


This communication is being distributed in the United
States solely to qualified institutional buyers, as defined in Rule 144A
under the Securities Act of 1933.  These
securities have not been registered under the Securities Act of 1933, and may
only be sold to qualified institutional buyers pursuant to Rule 144A or
pursuant to another applicable exemption.


 


This material is confidential and is for your information
only and is not intended to be used by anyone other than you. This information
does not purport to be a complete description of these securities or the
offering.  Please refer to the offering
circular for a complete description.


 


This communication does not constitute an offer to
sell or the solicitation of an offer to buy any securities in any jurisdiction
to any person to whom it is unlawful to make such offer or solicitation in such
jurisdiction.


 


A copy of the preliminary offering circular for the
offering can be obtained from your Goldman Sachs sales person or Goldman, Sachs &
Co., 85 Broad Street, New York, NY 10004 Attention: Prospectus Department
(212)-902-1171.


 


ANY DISCLAIMERS OR OTHER NOTICES THAT MAY APPEAR
BELOW ARE NOT APPLICABLE TO THIS COMMUNICATION AND SHOULD BE DISREGARDED. SUCH
DISCLAIMERS OR OTHER NOTICES WERE AUTOMATICALLY GENERATED AS A RESULT OF THIS
COMMUNICATION BEING SENT VIA BLOOMBERG OR ANOTHER EMAIL SYSTEM.


 


III-5

















 


SCHEDULE IV


 


Officers


 


Ronald J. Kramer


Douglas Wetmore


Patrick L. Alesia


 


Directors


Henry A. Alpert


Bertrand M. Bell


Harvey R. Blau


Gerald J. Cardinale


Blaine V. Fogg


Bradley J. Gross


Rear Admiral Robert G.
Harrison (USN Ret.)


Rear Admiral Clarence A.
Hill, Jr.


General Donald J. Kutyna


James A. Mitarotonda


Martin S. Sussman


William H. Waldorf


Joseph J. Whalen


 


IV-1

















 


ANNEX I


 


[Form of Comfort
Letter]


 


Pursuant
to Section 8(d) of the Purchase Agreement, the accountants shall
furnish letters to the Purchasers to the effect that:


 


(i)                         They are an
independent registered public accounting firm with respect to the Company and
its subsidiaries within the meaning of the Securities Exchange Act of 1934 (the
“Exchange Act”) and the applicable published rules and regulations
thereunder adopted by the Securities and Exchange Commission and the Public
Accounting Oversight Board (United States).


 


(ii)                      In our opinion,
the consolidated financial statements and financial statement schedules audited
by us and included in the Offering Circular comply as to form in all material
respects with the applicable requirements of the Exchange Act and the related
published rules and regulations;


 


(iii)                   The unaudited selected
financial information with respect to the consolidated results of operations
and financial position of the Company for the five most recent fiscal years
included in the Offering Circular agrees with the corresponding amounts (after
restatements where applicable) in the audited consolidated financial statements
for such five fiscal years;


 


(iv)                  On the basis of limited
procedures not constituting an audit in accordance with generally accepted
auditing standards, consisting of a reading of the unaudited financial
statements and other information referred to below, a reading of the latest
available interim financial statements of the Company and its subsidiaries,
inspection of the minute books of the Company and its subsidiaries since the
date of the latest audited financial statements included in the Offering
Circular, inquiries of officials of the Company and its subsidiaries
responsible for financial and accounting matters and such other inquiries and
procedures as may be specified in such letter, nothing came to their attention
that caused them to believe that:


 


(A)                  the unaudited consolidated
statements of income, consolidated balance sheets and consolidated statements
of cash flows included in the Offering Circular are not in conformity with
generally accepted accounting principles applied on the basis substantially
consistent with the basis for the unaudited condensed consolidated statements
of income, consolidated balance sheets and consolidated statements of cash
flows included in the Offering Circular;


 


(B)                    any other unaudited income
statement data and balance sheet items included in the Offering Circular do not
agree with the corresponding items in the unaudited consolidated financial
statements from which such data and items were derived, and any such unaudited
data and items were not determined on a basis substantially consistent with the
basis for the corresponding amounts in the audited consolidated financial
statements included in the Offering Circular;


 


(C)                    the unaudited financial
statements which were not included in the Offering Circular but from which were
derived any unaudited condensed financial statements referred to in clause (A) and
any unaudited income statement data and balance sheet items included in 


 


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the
Offering Circular and referred to in clause (B) were not determined on a
basis substantially consistent with the basis for the audited consolidated
financial statements included in the Offering Circular;


 


(D)                   any unaudited pro forma
consolidated condensed financial statements included in the Offering Circular
do not comply as to form in all material respects with the applicable
accounting requirements or the pro forma adjustments have not been properly
applied to the historical amounts in the compilation of those statements;


 


(E)                     as of a specified date not
more than five days prior to the date of such letter, there have been any
changes in the consolidated capital stock (other than issuances of capital
stock upon exercise of options and stock appreciation rights, upon earn-outs of
performance shares and upon conversions of convertible securities, in each case
which were outstanding on the date of the latest financial statements included
in the Offering Circular or any increase in the consolidated long-term debt of
the Company and its subsidiaries, or any decreases in consolidated net current
assets or stockholders’ equity or other items specified by the Representatives,
or any increases in any items specified by the Representatives, in each case as
compared with amounts shown in the latest balance sheet included in the
Offering Circular except in each case for changes, increases or decreases which
the Offering Circular discloses have occurred or may occur or which are
described in such letter; and


 


(F)                     for the period fro the date
of the latest financial statements included in the Offering Circular to the
specified date referred to in clause (E) there were any decreases in
consolidated net revenues or operating profit or the total or per share amounts
of consolidated net income or other items specified by the Representatives, or
any increases in any items specified by the Representatives, in each case as
compared with the comparable period of the preceding year and with any other
period of corresponding length specified by the Representatives, except in each
case for decreases or increases which the Offering Circular discloses have
occurred or may occur or which are described in such letter; and


 


(v)                     In addition to the
examination referred to in their report(s) included in the Offering
Circular and the limited procedures, inspection of minute books, inquiries and
other procedures referred to in paragraphs (iii) and (iv) above, they
have carried out certain specified procedures, not constituting an audit in
accordance with generally accepted auditing standards, with respect to certain
amounts, percentages and financial information specified by the
Representatives, which are derived from the general accounting records of the
Company and its subsidiaries, which appear in the Offering Circular, and have
compared certain of such amounts, percentages and financial information with
the accounting records of the Company and its subsidiaries and have found them
to be in agreement.


 


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ANNEX II


 


GRIFFON CORPORATION


 


Lock-Up Agreement


 


December [    ], 2009


 


Goldman, Sachs & Co.


85 Broad Street


New York, NY 10004


 


Re:  Griffon Corporation - Lock-Up Agreement


 


Ladies and Gentlemen:


 


The undersigned
understands that you, as representative of the initial purchasers
(collectively, the “Initial Purchasers”), propose to enter into a Purchase
Agreement (the “Purchase Agreement”) with Griffon Corporation, a Delaware
Corporation (the “Company”), providing for a private offering of the convertible
notes of the Company (the “Notes”), convertible into consideration that may
include shares of common stock of the Company, par value $0.25, (the “Common
Stock”), which will be offered pursuant to Rule 144A.


 


In consideration
of the agreement by the Initial Purchasers to offer and sell the Notes, and of
other good and valuable consideration the receipt and sufficiency of which is
hereby acknowledged, the undersigned agrees that, during the period beginning
from the date hereof and continuing to and including the date 90 days after the
date of the final offering circular (the “Lock-up Period”) covering the private
offering of the Notes (the “Offering Circular”), the undersigned will not
offer, sell, contract to sell, pledge, grant any option to purchase, make any
short sale or otherwise dispose of any shares of Common Stock of the Company,
or any options or warrants to purchase any shares of Common Stock of the
Company, or any securities convertible into, exchangeable for or that represent
the right to receive shares of Common Stock of the Company, whether now owned
or hereinafter acquired, owned directly by the undersigned (including holding
as a custodian) or with respect to which the undersigned has beneficial
ownership within the rules and regulations of the SEC (collectively the “Undersigned’s
Shares”).


 


The foregoing
restriction is expressly agreed to preclude the undersigned from engaging in
any hedging or other transaction which is designed to or which reasonably could
be expected to lead to or result in a sale or disposition of the Undersigned’s
Shares even if such Shares would be disposed of by someone other than the
undersigned. Such prohibited hedging or other transactions would include
without limitation any short sale or any purchase, sale or grant of any right
(including without limitation any put or call option) with respect to any of
the Undersigned’s Shares or with respect to any security that includes, relates
to, or derives any significant part of its value from such Shares.


 


Notwithstanding
the foregoing, the undersigned may transfer the Undersigned’s Shares, or any
securities convertible into, exchangeable for or that represent the right to
receive shares of Common Stock of the Company, (i) as a bona fide gift or gifts, provided that the donee or donees
thereof agree to 


 


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be bound in writing by
the restrictions set forth herein, (ii) to any trust for the direct or
indirect benefit of the undersigned or the immediate family of the undersigned,
provided that the trustee of the trust agrees to be bound in writing by the
restrictions set forth herein, and provided further that any such transfer
shall not involve a disposition for value, or (iii) with the prior written
consent of Goldman, Sachs & Co. on behalf of the Initial
Purchasers.  For purposes of this Lock-Up
Agreement, “immediate family” shall mean any relationship by blood, marriage or
adoption, not more remote than first cousin. 
In addition, notwithstanding the foregoing, if the undersigned is a
corporation, the corporation may transfer the capital stock of the Company to
any wholly-owned subsidiary of such corporation; provided, however,
that in any such case, it shall be a condition to the transfer that the
transferee execute an agreement stating that the transferee is receiving and
holding such capital stock subject to the provisions of this Lock-Up Agreement
and there shall be no further transfer of such capital stock except in
accordance with this Lock-Up Agreement, and provided  further that
any such transfer shall not involve a disposition for value.  The undersigned also agrees and
consents to the entry of stop transfer instructions with the Company’s transfer
agent and registrar against the transfer of the Undersigned’s Shares except in
compliance with the foregoing restrictions.


 


The undersigned
understands that the Company and the Initial Purchasers are relying upon this
Lock-Up Agreement in proceeding toward consummation of the offering.  The undersigned further understands that this
Lock-Up Agreement is irrevocable and shall be binding upon the undersigned’s
heirs, legal representatives, successors, and assigns.


 


If the Purchase
Agreement is not executed, or if the Purchase Agreement (other than the
provisions thereof which survive termination) shall terminate or be terminated
prior to payment for and delivery of the Notes to be sold thereunder, the
undersigned shall be released from all obligations herein.


 


	
   

  	
  Very truly yours,

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Exact Name of Shareholder

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Authorized Signature

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Title

  



 


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Exhibit A


 


[Form of Opinion of Dechert LLP]


 


A-1